Focus on
Video Games Tax Relief
Video Games tax relief was introduced in April
2014 after receiving EU approval following
the original announcement in Budget 2013.
Video Games Tax Relief (VGTR) was introduced to promote the UK games
industry. Although many costs of the games were (and still are) eligible
for R&D tax relief (such as increasingly realistic graphics, sound or
playability or development of existing games to work on new platforms)
many were not and it was felt that the UK was falling behind, especially to
countries with specific reliefs for video games.
This relief can provide a cash tax saving or
payable credit of 16- 25% of the core UK
expenditure. It is important to work with
experienced advisors in order to obtain the
optimal tax relief.
The relief is available for UK development companies, i.e. those primarily
responsible for designing, producing and testing the game and actively
engaged in the planning and decision making.
Eligible games
In order to be eligible for the relief, the following criteria must be met:
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The game must be intended for supply to the general public.
It must be certified as British.
At least 25% of core expenditure on the game must be EEA
expenditure.
Video games do not include anything for advertising, promotional or
gambling purposes.
Cultural test
Calculation
In order to be certified as British, the game must pass a cultural test.
The relief can be claimed on the lower of:
The cultural test includes criteria such as setting, location of developers
and subject matter, with points available for each. In order to qualify, a
game must gain at least 16 points out of a total of 31.
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Certification is granted by the Department for Culture, Media and Sport
(DCMS), and the relief cannot be claimed until it has been granted.
Interim certificates can be obtained if the game is not yet complete, with a
final certificate being issued on completion.
Minimum 25% core EEA expenditure
The relief is only provided on core, rather than total, expenditure. Core
expenditure relates to:
80% of the total core expenditure
Actual EEA expenditure incurred.
It is important to note that each game must be treated as a separate trade
in the development company, and therefore the accounting and allocation
of costs between games is important.
Rates of relief
The video games development company can claim an additional
deduction of 100%, or a payable tax credit of 25% if the programme is
loss making.
Where can I get help to establish my claim?
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Designing
Producing
Testing.
Core expenditure does not include designing the original concept or
debugging the completed game or post release maintenance.
In order to qualify, a minimum of 25% of the core expenditure must be
EEA expenditure - defined as ‘expenditure of goods and services which
are consumed in the EEA’ i.e. it is the recipient, not supplier, of the goods
or services that is relevant in determining the location.
The tax relief available is generous, but claims must be properly made to
ensure they meet HMRC and DCMS requirements. Claims will be reviewed
carefully so it is important to work with experienced tax advisers to
ensure your claim meets the necessary criteria.
In addition, as some costs can be claimed on either VGTR or R&D tax
relief, it is important to work with advisers experienced in both to ensure
you obtain the optimal relief over the course of each game
MHA MacIntyre Hudson works with a number of development companies
and has made countless R&D claims over the years and so understands
how to make successful claims in the most efficient manner.
Contact us
Patrick King CTA
Tax Partner
T: 01494 441226
E: [email protected]
Tom Byng ACA CTA
Tax Partner
T: 020 8446 0922
E: [email protected]
As a member of MacIntyre Hudson’s management
board, Patrick is chairman of the firm’s tax
strategy group, leading a team of specialists
which ensures clients have access to the very best
in tax compliance services and tax mitigation
solutions. Patrick’s own specialisms are capital tax
planning for individuals, corporate restructuring
and remuneration planning. He also advises clients
on the tax implications of buying and selling their
business.
Tom works with entrepreneurial businesses from a variety
of industries through all stages of their life - from starting
up, through growth, reorganisation, expansion into new
markets and ultimately to exit. He advises the company,
business leaders, the shareholders and prospective
investors in order to optimise their tax position in the
context of their commercial objectives.
He specialises in assisting businesses with Research and
Development (R&D) and patent box tax relief claims,
maximising the cash tax savings in a simple and cost
effective manner. Since joining MHA MacIntyre Hudson
in March 2013 he has obtained cash refunds for clients
totalling almost £10 million and to date has not had a claim
turned down.
Tom also helps to lead the firm’s specialist technology
sector group and regularly speak at events organised by
both MHA MacIntyre Hudson and third parties (such as
the Chartered Institute of Taxation) on all aspects of tax,
although primarily on R&D and patent box.
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Information correct as of 16.05.16